Microsoft Corp. is working on a yet another version of the Xbox 360 game console that will have digital audio and video output and more storage, according to a media report. It is unclear whether the console will feature a built-in HD DVD drive, but it is still remarkable that the world’s largest software maker updates its existing console lineup.

The new improved version of the Microsoft Xbox 360 game console code-named Zephyr will feature 120GB hard disk drive, HDMI connector and will be based on the 65nm version of the three-core PowerPC-architecture custom processor by IBM, according to Engadget web-site. It remains to be seen whether the console will include a built-in HD DVD drive, but that would be a likely scenario, as HDMI connector provides 1920x1080 (progressive scan) resolution, which benefits high definition videos on the first place.

The media report claims that the improved flavour of the Xbox 360 will be available “soon”, however, it is unclear how exactly “soon”, as the 65nm version of the console’s processor had been delayed till mid-2007 and it hardly makes sense for Microsoft to update its console in Summer. Pricing of the console is also unclear.

Backside of the Xbox 360 "Zephyr" with HDMI connector

Microsoft Xbox 360 console is based around triple-core microprocessor developed by IBM, high-definition visual processing unit designed by ATI Technologies featuring unified shader architecture, I/O controller engineered by SiS and some other key components. The gaming machine provides a broad set of multimedia capabilities, including high-definition movies and TV programs downloads in addition to games. Microsoft Xbox 360 core without hard drive is currently priced at $299, whereas the model featuring 20GB HDD and wireless controller has recommended price of $399 in Europe and the U.S. Microsoft also offers HD DVD add-on drive for the console for $199.

Microsoft did not comment on the news-story.